THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITIES INTEREST ACT, 2002 (ALSO KNOWN AS THE SARFAESI ACT)

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 SECURITY INTEREST [ENFORCEMENT] RULES 2002

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ITS APPLICATION IN THE PROCESS OF RECOVERY OF THE LOANS IN-CASE OF DEFAULT/NON-PAYMENT/NON-PERFORMING ASSETS; –

 

 

APPLICABILITY: –

1. The provisions of this Act are applicable only for NPA loans with outstanding above ₹00 lac.

 

2. NPA [Non-Performing Asset] Loan accounts where the amount due/outstanding is less than 20% of the principal and interest are not eligible to be dealt with under this Act.

 

3. The Act does not apply to agriculture land – any security interest created over agricultural land cannot be proceeded with.

 

 

NON-PERFORMING ASSET [NPA]: –

 

• If no EMI [equated monthly installments]as agreed is paid/deposited by the Borrower in the Bank for a consecutive period of 3 months, then the Bank/s are Authorized to declare the loan account of the Borrower as NPA and are eligible to take further steps towards recovery against the Borrower under the said Act.

 

 

UPON DEFAULT: –

 

NOTICE U/S. 13[2] OF THE ACT/DEMAND NOTICE: –

1. Borrower Defaults and his/her/her loan A/c. Is declared as an NPA, a Demand Notice is issued by the Bank, addressed to the Borrower as well as the guarantor/s to discharge in full his/her liabilities to the Secured Creditor within sixty days from the date of Notice failing which the Secured Creditor/Bank shall be entitled to exercise all or any of the rights under Subsection(4)of the said Act.

SERVICE OF DEMAND NOTICE: – 1.  CHANGE IN THE ADDRESS & METHOD: – Please note changes in the addresses of the Borrowers if any before addressing the Demand Notice. Change of address of Borrower(s) must be obtained in writing. Oral information is not reliable as it is construed as not born out of record. Serve Demand Notice as contemplated in Rule 3 of security interest (enforcement) Rules 2002- 3(1) the service of Demand Notice shall be made by delivering or transmitting at the place where the Borrower or his/her agent, empowered to accept the Notice or documents on behalf of the Borrower, Actually and voluntarily resides or carries on business or personally works for gain, by registered post with acknowledgement due, addressed to the Borrower (or his/her agent empowered to accept the service) or by speed post or by courier or by any other means of transmission of documents like fax message or electronic mail service.   2.    SERVICE OF NOTICE TO WIFE OF BORROWER IS SUFFICIENT SERVICE: – If Borrower’s marital relationship is not judicially separated or dissolved by order of Competent Court.   3.    IF BORROWER IS A BODY CORPORATE: – Rule 3(2): where the Borrower is a Body Corporate, the Demand Notice shall be served on the registered office or any of the branches of such Body Corporate as specified under Sub-Rule (1).   4.    HOW MANY DEMAND NOTICES A SECURED CREDITOR CAN ISSUE: – There is no bar. Any number of Notices can be issued provided the security interest sought to be enforced is not barred by limitation.   5.    THE MANNER OF SERVICE OF ANY NOTICE RULE 3(3) OF SECURITY INTEREST [ENFORECEMENT] RULES 2002 RULES– Rule 3(3):  Any other Notice [i.e. Possession Notice under 13(4) of SARFAESI Act or Rule 8(6) of SECURITY INTEREST [ENFORECEMENT] RULES 2002 Rules] in writing to be served on the Borrower or his/her agent by Authorised Officer, shall be served in the same manner as provided in Rule 3.

 

HOW TO CALCULATE THE QUANTUM OF CLAIM AMOUNT IN THE DEMAND NOTICE: –

 

1. Please ensure that, the balance outstanding in the Bank’s book and the un-debited portion of interest accrued but not reflected in the Bank’s book (on account of status of the loan account as NPA) are added and incorporated in the Demand Notice. The Authorised Officer (for short “AUTHORIZED OFFICER”) need not approach any Court or Tribunal for determination of the quantum of amount of claim.

 

REPRESENTATION/OBJECTIONS BY THE BORROWER U/S.13[3A]: –

1. The Borrower is entitled to make his/her representation and raise her/her objections to the Notice upon the receipt of the Demand Notice u/s. 13[2] – Demand Notice

 

2. The Bank/Secured Creditor is entitled to reply indicating the reasons for acceptance and/or non-acceptance of the representation/objection raised by the Borrower within 15 days upon the receipts of such representation/objection raised by the Borrower.

 

PROCEDURE/GUIDELINES AFTER RECEIVING REPRESENTATION/OBJECTION FROM THE BORROWER: – 1. If on examining the representation made or objection raised by the Borrower, the Secured Creditor is satisfied that there is a need to make any changes or modifications in the Demand Notice, he shall modify the Notice accordingly and serve a revised Notice or pass such other suitable orders as deemed necessary, within seven days from the date of receipt of the representation or objection.   2.  If on examining the representation made or objection raised, the Authorized Officer comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection, the reasons for non-acceptance of the representation or objection, to the Borrower.

 

UPON NON-ACCEPTANCE OF THE REPRESENTATION/OBJECTION OF THE BORROWER, THE BANK ENTITLED TO TAKE FOLLOWING STEPS FOR RECOVERING THE SAID OUTSTANDING LOAN AMOUNT; –

 

STEPS U/S. 13[4] OF THE SAID ACT: –

 

1. In case the Borrower fails to discharge his/her liability in full within the period specified in the Demand Notice i.e. sixty days, the Secured Creditor may take recourse to one or more of the following measures to recover his/her Secured Debt: –

 

1. Take Possession of the Secured Assets of the Borrower including the right to transfer by way of lease, assignment or Sale for realizing the Secured Asset.

 

1. Take over the management of the business of the Borrower including the right to transfer by way of lease, assignment or Sale for realizing the Secured Asset: provided that the right to transfer by way of lease, assignment or Sale shall be exercised only where the Substantial part of the business of the Borrower is held as security for the Debt: provided further that where the management of whole of the business or part of the business is severable, the Secured Creditor shall take over the management of such business of the Borrower which is relatable to the security for the Debt.

 

1. Appoint any person (hereafter referred to as the manager), to manage the Secured Assets the Possession of which has been taken over by the Secured Creditor.

 

1. Require at any time by Notice in writing, any person who has acquired any of the Secured Assets from the Borrower and from whom any money is due or may become due to the Borrower, to pay the Secured Creditor, so much of the money as is sufficient to pay the Secured Debt.

 

IN CASE OF THE POSSESSION OF THE MOVABLE SECURED ASSET: –

 

1. Where the Possession of the Secured Assets to be taken by the Secured Creditor are Movable Property in Possession of the Borrower, the Authorized Officer shall take Possession of such Movable Property in the presence of two witnesses after Panchnama drawn and signed by the witnesses as nearly as possible in appendix [i] to these Rules.

 

2. After taking Possession under Sub-Rule (1) above, the Authorized Officer shall make or cause to be made an inventory of the Property as nearly as possible in the form given in Appendix [ii] to these Rules and deliver or cause to be delivered, a copy of such inventory to the Borrower or to any person entitled to receive on behalf of Borrower.

 

3. The Authorized Officer shall keep the Property taken Possession under Sub-Rule (1) either in his/her own custody or in the custody of any person Authorized or appointed by him, who shall take as much care of the Property in his/her custody as owner of ordinary prudence would, under the similar circumstances, take of such Property: provided that if such Property is Subject to speedy or natural decay, or the expense of keeping such Property in custody is likely to exceed its value, the Authorized Officer may sell it at once.

 

4. The Authorized Officer shall take steps for preservation and protection of Secured Assets and insure them, if necessary, till they are sold or otherwise disposed of.

 

 

 

IN CASE ANY SECURED ASSET IS: –

 (A) A Debt Not Secured by Negotiable Instrument; Or

(B) A Share, In A Body Corporate;

(C) Other Movable Property Not in The Possession of The Borrower

Except the Property Deposited in or in the Custody of any Court or any like Authority, the Authorized Officer shall obtain Possession or Recover the Debt by Service of Notice as under: –

 

1. In the case of a Debt, prohibiting the Borrower from recovering the Debt or any interest thereon and the Debtor from making payment thereof and directing the Debtor to make such payment to the Authorized Officer, or

 

2. In the case of the shares in a Body Corporate, directing the Borrower to transfer the same to the Secured Creditor and also the Body Corporate from not transferring such shares in favor of any person other than the Secured Creditor. A copy of the Notice so sent may be endorsed to the concerned Body Corporate’s registrar to the issue or share transfer agents, if any.

 

3. In the case of other Movable Property (except as aforesaid), calling upon the Borrowers and the person in Possession to hand over the same to the Authorized Officer and the Authorized Officer shall take custody of such Movable Property in the same manner as provided in Sub-Rules (1) to (3) above.

 

4. Movable Secured Assets other than those covered in this Rule shall be taken Possession of by the Authorized Officer by taking Possession of the documents evidencing title to such Secured Assets.

 

AFTER TAKING THE POSSESSION OF THE MOVABLE ASSET/S: –

 

VALUATION REPORT: –

1. Valuation of Movable Secured Assets.- after taking Possession under Sub-Rule (1) of Rule 4 and in any case before Sale, the Authorized Officer shall obtain the estimated value of the Movable Secured Assets and thereafter, if considered necessary, fix in consultation with the Secured Creditor, the reserve price of the Assets to he sold in realization of the dues of the Secured Creditor.

SALE OF MOVABLE SECURED ASSETS–

1. He Authorized Officer may sell the Movable Secured Assets taken Possession under Sub-Rule (1) of Rule 4 in one or more lots by adopting any of the following methods to secure maximum Sale price for the Assets, to be so sold-

1. Obtaining quotations from Parties dealing in the Secured Assets or otherwise interested in buying such Assets; or
2. Inviting Tenders from the Public; or
3. Holding Public Auction; or
4. By Private Treaty.

 

2.     The Authorized Officer shall serve to the Borrower a Notice of thirty days for Sale of the Movable Secured Assets,                   under Sub-Rule (1): provided that if the Sale of such Secured Assets is being, effected by either inviting lenders from                 the Public or by holding Public Auction, the Secured Creditor shall cause a Public Notice in two Leading Newspapers,               one in Vernacular language, having sufficient circulation in that locality by setting out the terms of Sale, which may                   include,-

1. Details about the Borrower and the Secured Creditor.
2. Description of Movable Secured Assets to be sold with identification marks or numbers, if any, on them.
3. Reserve price, if any, and the time and manner of payment.
4. Time and place of Public Auction or the time after which Sale by any other mode shall be completed.
5. Depositing earnest money as may be stipulated by the Secured Creditor; any other thing which the Authorized Officer considers it material for a Purchaser to know in order to judge the nature and value of Movable Secured Assets.

 

3.       Sale by any methods other than Public Auction or Public Tender, shall be on such terms as may be settled between the            Parties in writing.

 

SECTION 14- CHIEF METROPOLITAN MAGISTRATE OR DISTRICT MAGISTRATE TO ASSIST SECURED CREDITOR IN TAKING POSSESSION OF SECURED ASSET: –

 

1. Where the Possession of any Secured Assets is required to be taken by the Secured Creditor or if any of the Secured Asset is required to be sold or transferred by the Secured Creditor under the provisions of this Act, the Secured Creditor may, for the purpose of taking Possession or control of any such Secured Asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such Secured Asset or other documents relating thereto may be situated or found, to take Possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him; –
2. Take Possession of such Asset and documents relating thereto; and
3. Forward such Assets and documents to the Secured Creditor.

 

2. For the purpose of securing compliance with the provisions of Sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his/her opinion, be necessary.

 

3. No Act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any Court or before any Authority.

 

ISSUE OF CERTIFICATE OF SALE: –

1. Where Movable Secured Assets is sold, Sale price of each lot shall be paid as per the terms of the Public Notice or on the terms as may be settled between the Parties, as the case may be, and in the event of Default of payment, the Movable Secured Assets shall be liable to be offered for Sale again.

 

2. On payment of Sale price, the Authorized Officer shall issue a Certificate of Sale in the prescribe form appendix iii to these Rules specifying the Movable Secured Assets sold, price paid and the name of the Purchaser and thereafter the Sale shall become absolute. The Certificate of Sale so issued shall be prima facie evidence of title of the Purchaser.

 

3. Where the Movable Secured Assets are those referred in Sub-clauses (iii) to (v) of clause (1) of Sub-section (1) of section 2 of the 12[Act], the provisions contained in these Rules and Rule 7 dealing with the Sale of Movable Secured Assets shall, mutatis mutandis, apply to such Assets.

 

SALE PROCESS: –

1. Sale of Immovable Property under these Rules shall take place before the expiry of thirty days from the date on which the Public Notice of Sale is published in newspapers as referred to in the proviso to Sub-Rule (6) or Notice of Sale has been served to the Borrower.

 

2. The Sale shall be confirmed in favor of the Purchaser who has offered the highest sale price in his/her Bid or Tender Substituted by S.O. 103(e), dated 2-2-2007, for “Ordinance” (w.e.f. 2-2-2007). 13 inserted by S.O.1837(e), dated 26-10-2007. Prior to its Substitution Sub-Rule (2) read as under:- “the Possession Notice as referred to in Sub-Rule (1) shall also be published in two leading newspaper” or quotation or offer to the Authorized Officer and shall be Subject to confirmation by the Secured Creditor: provided that no Sale under this Rule shall be confirmed, if the amount offered by Sale price is less than the reserve price, specified under Sub-Rule (5) of Rule 9 : provided further that if the Authorized Officer fails to obtain a price higher than the reserve price, he may, with the consent of the Borrower and the Secured Creditor effect the Sale at such price.

 

3. On every Sale of Immovable Property, the Purchaser shall immediately pay a deposit of twenty-five per cent. Of the amount of the Sale price, to the Authorized Officer conducting the Sale and in Default of such deposit, the Property shall forthwith be sold again.

 

4. The balance amount of purchase price payable shall be paid by the Purchaser to the Authorized Officer on or before the fifteenth day of confirmation of Sale of the Immovable Property or such extended period as may be agreed upon in writing between the Parties.

 

5. In Default of payment within the period mentioned in Sub-Rule (4), the deposit shall be forfeited, and the Property shall be resold, and the Defaulting Purchaser shall forfeit all claim to the Property or to any part of the sum for which it may be Subsequently sold.

 

6. On confirmation of Sale by the Secured Creditor and if the terms of payment have been complied with, the Authorized Officer exercising the power of Sale shall issue a Certificate of Sale of the Immovable Property in favor of the Purchaser in the form given in appendix v to these Rules.

 

7. Where the Immovable Property sold is Subject to any encumbrances, the Authorized Officer may, if he thinks fit, allow the Purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him. 14[provided that if after meeting the cost of removing encumbrances and contingencies there is any surplus available out of money deposited by the Purchaser such surplus shall be paid to the Purchaser within fifteen day, from date of finalization of the Sale.]

 

8. On such deposit of money for discharge of the encumbrances, the Authorized Officer 15[shall] issue or cause the Purchaser to issue Notices to the persons interested in or entitled to the money deposited with him and take steps to make, the payment accordingly.

 

9. He Authorized Officer shall deliver the Property to the Purchaser free from encumbrances known to the Secured Creditor on Time of Sale, issue of Sale Certificate and delivery of Possession, etc.- (1) no deposit of money as specified in Sub-Rule (7) above.

 

10. The Certificate of Sale issued under Sub-Rule (6) shall specifically mention that whether the Purchaser has purchased the Immovable Secured Asset free from any encumbrances known to the Secured Creditor or not.

 

SALE PROCESS OF THE PROPERTIES: –

1. Where the Secured Asset is an Immovable Property, the Authorized Officer shall take or cause to be taken Possession, by delivering a Possession Notice prepared as nearly as possible in appendix iv to these Rules, to the Borrower and by affixing the Possession Notice on the outer door or at such conspicuous place of the Property.

 

2. 13[the Possession Notice as referred to in Sub-Rule (1) shall also be published, as soon as possible but in any case, not later than seven days from the date of taking Possession, in two leading newspaper] one in vernacular language having sufficient circulation in that locality, by the Authorized Officer.

 

3. In the event of Possession of Immovable Property is Actually taken by the Authorized Officer, such Property shall be kept in his/her own custody or in the custody of any person Authorized or appointed by him, who shall take as much care of the Property in his/her custody as an owner of ordinary prudence would, under the similar circumstances, take of such Property.

 

4. The Authorized Officer shall take steps for preservation and protection of Secured Assets and insure them, if necessary, till they are sold or otherwise disposed of.

 

5. Before effecting Sale of the Immovable Property referred to in Sub-Rule (1) of Rule 9, the Authorized Officer shall obtain valuation of the Property from an approved valuer and in consultation with the Secured Creditor, fix the reserve price of the Property and may sell the whole or any part of such Immovable Secured Asset by any of the following methods:- (a) by obtaining quotations from the persons dealing with similar Secured Assets or otherwise interested in buying the such Assets; or (b) by inviting Tenders from the Public; (c) by holding Public Auction; or (d) by private treaty.

 

6. The Authorized Officer shall serve to the Borrower a Notice of thirty days for Sale of the Immovable Secured Assets, under Sub-Rule (5): provided that if the Sale of such Secured Asset is being effected by either inviting Tenders from the Public or by holding Public Auction, the Secured Creditor shall cause a Public Notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of Sale, which shall include: –

 

1. The description of the Immovable Property to be sold, including the details of the encumbrances known to the Secured Creditor;
2. The Secured debt for recovery of which the Property is to be sold;
3. Reserve price, below which the Property may not be sold;
4. Time and place of Public Auction or the time after which Sale by any other mode shall be completed;
5. Depositing earnest money as may stipulated by the Secured Creditor;
6. Any other thing which the Authorized Officer considers it material for a Purchaser to know in order to judge the nature and value of the Property.

 

7. Every Notice of Sale shall be affixed on a conspicuous part of the Immovable Property and may, if the Authorized Officer deems it fit, put on the website of the Secured Creditor on the internet.

 

8. Sale by any methods other than Public Auction or Public Tender, shall be on such terms as may be settled between the Parties in writing.

 

PROCEDURE FOR RECOVERY OF SHORTFALL OF SECURED DEBT–

 

1. An application for recovery of balance amount by any Secured Creditor pursuant to Sub-section (10) of section 13 of the 18[Act] shall be presented to the debts recovery Tribunal in the form annexed as appendix vi to these Rules by the Authorized Officer or his/her agent or by a duly Authorized Legal Practitioner, to the registrar of the bench within whose jurisdiction his/her case falls or shall be sent by registered post addressed to the registrar of debts recovery Tribunal.

 

2. The provisions of the debts recovery Tribunal (procedure) Rules, 1993 made under recovery of debts due to banks and financial institutions Act, 1993 (51 of 1993), shall mutatis mutandis apply to any application filed by under Sub-Rule (1).

 

3. An application under Sub-Rule (1) shall be accompanied with fee as provided in Rule 7 of the debt’s recovery.

 

 

RESERVE PRICE: –

• Valuation minus 15% or 20%

 

SALE NOTICE-PERSONAL RULE 8(6): –

• The Authorized Officer shall serve to the Borrower a Notice of thirty days for Sale of the Immovable Secured Assets, under Sub-Rule (5).

 

SERVICE OF SALE NOTICE: –

• Sale Notice must be served in the same manner as the Demand Notice and Possession Notice are served in the same manner as contemplated in the Sub Rule (1) Of Rule 3 of Security Interest [Enforcement] Rules 2002.

 

• See Rule 3(3) demanding the Borrowers to pay the debt as demanded in the Demand Notice and Possession Notice together with interest. If the Sale of such Secured Asset is being effected by either inviting Tenders from the Public or by holding Public Auction, the Secured Creditor shall cause a Public Notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of Sale, which shall include,

 

1. The description of the Immovable Property to be sold, including the details of the encumbrances known to the Secured Creditor.
2. The Secured debt for recovery of which the Property is to be sold;
3. Reserve price, below which the Property may not be sold
4. Time and place of Public Auction or the time after which Sale by any other mode shall be completed;
5. Depositing earnest money as may be stipulated by the Secured Creditor;
6. Any other thing which the Authorized Officer considers it material for a Purchaser to know in order to judge the nature and value Of the Property.

 

PUBLICATION OF SALE NOTICE:  –

• Every Notice of Sale shall be affixed on a conspicuous part of the Immovable Property and may, if the Authorized Officer deems it fit, put on the website of the Secured Creditor on the internet.

AFFIXTURE OF SALE NOTICE: –

• Every Notice of Sale shall be affixed on a conspicuous part of the Immovable Property and may, if the Authorized Officer deems it fit, put on the website of the Secured Creditor on the internet.

 

SALE CANNOT BE EFFECTED BEFORE EXPIRY OF THIRTY DAYS: –

• No Sale of Immovable Property under these Rules shall take place before the expiry of thirty days from the date on which the Public Notice of Sale is published in newspapers as referred to in the proviso to Sub-Rule (6) or Notice of Sale has been served to the Borrower.

 

BIDDER: –

• A Bidder who has offered highest prize shall be identified as successful Bidder and he has to deposit 25% of the Bid amount immediately.

 

CONFIRMATION OF SELL: –

• The Sale shall be confirmed in favor of the Purchaser who has offered the highest Sale price in his/her Bid or Tender or quotation or offer to the Authorized Officer and shall be Subject to confirmation by the Secured Creditor.

 

SELL LESS THAN RESERVE PRICE: –

• No Sale shall be confirmed, if the amount offered is less than the reserve price.

 

PAYMENT BY BIDDER IN WHOSE FAVOR THE BID IS CONFIRMED: –

• The balance amount of purchase price payable shall be paid by the Purchaser to the Authorized Officer on or before the fifteenth day of confirmation of Sale of the Immovable Property or such extended period as may be agreed upon in writing between the Parties.

 

FORFEITURE AND RESALE OF SECURED ASSET: –

• In Default of payment within the period mentioned in Sub-Rule (4), the deposit shall be forfeited, and the Property shall be resold, and the Defaulting Purchaser shall forfeit all claim to the Property or to any part of the sum for which it may be Subsequently sold.

 

CONSENT OF BORROWER: –

• If the Authorized Officer fails to obtain a price higher than the reserve price, he may, with the consent of the Borrower and the Secured Creditor effect the Sale at such price.

COMPUTATION OF 60 DAYS: –

• The date of service of the Demand Notice or Publication of the Demand Notice after affixing it (as stated in the proviso to Rule 3(1) of Security Interest [Enforcement] Rules 2002 Rules) and the 60th day to be expired are to be excluded for computing the 60 days.

 

PROCEDURE FOR TAKING POSSESSION OF MOVABLE SECURED ASSETS: –

• Taking symbolic Possession of Movable Secured Assets is not permissible in law. Procedure for taking Possession of Movable Secured Assets is different from the procedure relating to the Immovable Secured Assets. In case the Secured Assets are Movable, the Authorized Officer has to take Possession of them in the presence of two witnesses and draw a Panchnama, as nearly as possible as given in appendix-i [ see Rule 4(2) of Security Interest [Enforcement] Rules 2002 Rules] (evidence to be preserved).

 

INVENTORY REPORT; –

• After taking Possession of the Movable Secured Assets, the Authorized Officer has to record ‘inventory report’ as per appendix–ii [see Rule 4(1) of Security Interest [Enforcement] Rules 2002 Rules] and deliver it or caused to be delivered it to the Borrower any person entitled to receive on behalf of Borrower. In the inventory report the Authorized Officer has to mention the name of the person appointed by him in whose custody the Secured Assets are preserved.

PRESERVATION: –

• To take care to preserve Movable Secured Assets which owner of ordinary prudence would take. In case of factories or stores the Secured Creditor has to entrust the same for custody of an Authorized person or approved re-possessors / security persons.

 

INSURANCE COVER: –

• Authorized Officer must take insurance cover if necessary, until Sale is completed. Comprehensive policy with a clause to pay the sum assured to the company which would discharge the insurance company against adverse claim of Borrower if any.

 

CIRCUMSTANCES FOR IMMEDIATE SALE: –

• There are two circumstances for immediate Sale of Movable Secured Assets.
• If Movable Secured Assets are Subject to speedy or natural decay
• Or the expense of keeping such Property in custody is likely to exceed its value, the Authorized Officer may sell them at once. (issue Sale Notice but need not wait for expiry of 30 days of the Sale Notice).

Authorized Officer must record reasons if necessary, by drawing a Panchnama in this regard.

 

PLANT AND MACHINERY ATTACHED TO EARTH: –

• Plant and machinery should be treated as part of the Immovable Secured Asset if they are fastened to the earth with cement and concrete as on the date of taking Possession. In the Possession Notice (appendix-iv) the same must be mentioned specifically giving brief description of the particulars of the machinery vide separate annexure attached to it.

 

PLANT AND MACHINERY IF DETACHED FROM EARTH: –

• If plant and machinery are detachable from earth as on the date of taking Possession then Authorized Officer has to record ‘inventory report’ as per appendix–ii [see Rule 4(1) of Security Interest [Enforcement] Rules 2002 Rules] and deliver it or caused to be delivered it to the Borrower any person entitled to receive on behalf of Borrower. In the inventory report the Authorized Officer has to mention the name of the person appointed by him in whose custody the Secured Assets are preserved.

 

VALUATION OF MOVABLE ASSETS: –

• After taking Possession under Sub-Rule (1) of Rule 4 and in any case before Sale, the Authorized Officer shall obtain the estimated value of the Movable Secured Assets and thereafter, if considered necessary, fix in consultation with the Secured Creditor, the reserve price of the Assets to he sold in realization of the dues of the Secured Creditor.

 

 

PROCEDURE IN CASE OF IMMOVABLE SECURED ASSETS-: –

• Take Possession of Immovable Secured asses (whether symbolic or physical), serve Possession Notice (appendix-iv) under sec.13(4) read with Rule 8(1) and(2), obtain acknowledgment of service, affix it to Secured Asset and publish it in two leading newspapers(one in vernacular) having sufficient circulation in the locality If Borrower refuses to acknowledge service of the Possession Notice, then the Authorized Officer may send it by registered post /courier and preserve evidence and the same may be recorded at the foot of the Possession Notice and obtain signature of two witnesses.

 

BORROWERS AS BIDDER: –

• Borrower can participate as Tenderer / Bidder to purchase the Secured Asset in the process of Sale.

 

ENCUMBRANCES: –

• The Purchaser has to deposit the encumbrances if any in respect of the Secured Asset sold. Where the Immovable Property sold is Subject to any encumbrances, the Authorized Officer may, if he thinks fit, allow the Purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him.

 

PAYMENT OF SURPLUS TO THE PURCHASER: –

• Provided that if after meeting the cost of removing encumbrances and contingencies there is any surplus available out of money deposited by the Purchaser such surplus shall be paid to the Purchaser within fifteen day, from date of finalization of the Sale.

 

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THE END

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